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CNN Live Saturday

Interview With Terry Savage

Aired August 10, 2002 - 17:14   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KRIS OSBORN, CNN ANCHOR: People who lost their life savings to corrupt corporate officers may just see a pay day after all. Scam stockholders may not be going after bankrupt corporations, though. Listen to this: Their attorneys are reportedly looking at ways to sue company executives and board members for, yes, their personal assets. Terry Savage, a financial columnist for the "Chicago Sun-Times" and the author of "The Savage Truth on Money" joins us now from Milwaukee. Hello, Terry.
TERRY SAVAGE, AUTHOR, "SAVAGE TRUTH ON MONEY": Hi, Kris.

OSBORN: Well, we all know about the upcoming August 14 deadline, the corporate accountability bill goes into effect. CEO's will have to sign off on their numbers, but now named as defendants in legal proceedings for their personal assets. Your reaction?

SAVAGE: Well, Kris, the sad savage truth about that is that investors have lost $6 trillion worth of investment income gains that they had, and there's no way that going after the miscreants is going to bring back even a small part of that. Investors in Enron lost about $67 billion, as the company went bankrupt. WorldCom, $140 billion. The billions we're talking about, and that sure does add up.

But there's no way that even if you went after the assets of those corporate officers and directors that you could make shareholders whole. Now, they are going to be juicy targets for the plaintiffs attorneys, but we shouldn't get investors' hopes up, because a lot of that money isn't in someone's hands. It's not in a mansion or an estate or something that you could sue and get back. That money just evaporated into thin air. It went to money heaven.

People are never surprised when money landed in their accounts, suddenly they were wealthy; now that money has disappeared because people paid too much for stocks, greed took over. So that wealth is gone, and it's very sad in many cases. And certainly the wrongdoers should be punished, but it won't come back because of lawsuits.

OSBORN: Well, Terry, you mentioned juicy numbers. Certainly the number -- the number -- the amount of money and the number of executives who cashed out stock options at WorldCom and Enron, just prior to announcing bankruptcy, those numbers are very, very high. Despite that, given that, is there a PR dimension to this? I mean, some are suggesting -- is this a witch-hunt? Is this level of corporate scrutiny going to hurt the economy?

SAVAGE: Well, there's no question -- first of all, there's two ways you can go after officers' and directors' assets. The SEC can levy fines and penalties and collect on those. That could happen right away. And lawyers can go after them as well.

Under the new corporate accountability law, any director or officer who cashed out on options before bankruptcy would be forced to give the money back and back to the shareholders, not to the U.S. Treasury. So there is a way to go after those.

But it would be a shame if this opened the door on lawsuits against all kinds of corporate executives. Many of the losses were done as we now know out of malfeasance on the part of officers and inattention perhaps or liability on the part of the directors. But a lot of those losses came because business turned around or bad judgments, or people pushed stock prices up too high, not because the directors or officers were to blame.

So you don't want to launch a witch-hunt, because then you won't have anybody wanting to serve -- to run the businesses that create the jobs and the wealth and the growth that is America. And that we need.

OSBORN: Well, Terry, of course, we all saw the very highly publicized perp walk of the WorldCom executives.

SAVAGE: Well, certainly there needs to be an example set, and I highly agree with that. We cannot treat that kind of action on the part of corporate executives any less seriously than we treat any other kind of crime. And to steal people's money and to mislead investors is without question a crime, and to say that, well, it was $3 billion or now maybe it's $7 billion that's been misplaced, misidentified is definitely -- and I think the courts will prove that a crime.

And so there should be that fear in those who run public companies or private companies or individuals of being called before the law. But that doesn't mean we want to go chasing down all the presidents and CEOs and CFOs. All they have to sign now -- you know, this is going to be an interesting weekend in the market coming up, because CEOs and CFOs on the 14th will have to sign, of the largest companies, that they believe that their earnings are absolutely correct, that they're liable for them.

The best CEOs that I've talked to say we always felt that we were liable and responsible for those numbers, but we'll see now which companies don't sign, and that can cause a lot of ups and downs in the markets this week ahead.

OSBORN: Thank you very much, Terry Savage, financial columnist with the "Chicago Sun-Times." It's a pleasure talking to you.

SAVAGE: Good to be with you, Kris.

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